So the possibility of generating coins today with a few cents of compute time may be quite a good bet, with a payoff of something like 100 million to 1! Even if the odds of Bitcoin succeeding to this degree are slim, are they really 100 million to one against? Something to think about . . .
Hal2
The first purchaser of bitcoins, Finney would be a bitcoin centi-millionaire if he had not been felled by Lou Gehrig’s disease in 2014. At the beginning of 2018, the value of the bitcoins believed to be owned by Nakamoto was roughly ten billion dollars.
Perhaps you like nested hierarchies of abstraction, recursions in recursions, like Matryoshka dolls—plays within plays, puzzles within puzzles. Perhaps you delight in logical paradoxes—Cretans asserting that all Cretans are liars, computer scientists insisting that their brains are merely computers, Byzantine generals outwitting treacherous messengers, physicists suggesting that they themselves are merely materialist meat-machines in one of an infinite number of parallel universes, and graphics virtuosos imagining that they are mere simulations in some gigantic virtual reality simulator controlled by a superior race of aliens.
If you are that kind of tinker-thinker, you may relish the emerging forms of finance. They nest real moneys and digital moneys in multiplayer games and virtual worlds, all encompassing the mystery of a ten-billion-dollar heist, now perhaps headed toward a trillion dollars. Or perhaps they all make your mind spin like mine.
So before we contemplate bitcoin and Ethereum, NEO and EOS, Blockstack and Ripple, let’s sit down and make ourselves comfortable.
What would you say if I told you that all of us, right now—in the United States and around the world—have been sucked up into the phantasmagorical pages of a novel by Neal Stephenson, the shy West Coast prodigy who is the twenty-first century’s greatest writer and demiurge? You can say it is my wild opinion. You can call it metafact or mystifiction, a demented conspiracy theory, or even a massively multiplayer online game, or a virtual world. But you cannot prove that it isn’t true—that the ardent logorrheic genius cyberludic scrivener with the ponytail and the kaleidoscopic brain and fiber-optic diet has not somehow infiltrated the very operating code of the system of the world. Kindled out of the headquarters of a giant corporation near his home in Seattle—call it Amazon—perhaps using its 3D streaming capabilities from OTOY’s Octane graphics rendering engine—Stephenson has phished all our identities and occupied our screens. He has gotten us all unconsciously to live his novel.
Well, that is admittedly far-fetched. But let’s contemplate Stephenson’s plot and its uncanny lessons for our world.
In Stephenson’s Reamde—his thousand-page thriller of 2011—a massively multiplayer online game (MMOG) called “T’Rain” has captivated the world’s digerati. It is virtual—a computerized 3D “second life”—but it has a crucial dimension that allows it to overflow into what we quaintly term “real life.” It has a currency—a monetary system—and it is based on a gold standard. It is a fake gold standard, but the emulation is accurate enough to create a gilded simulacrum of monetary value.
In Stephenson’s account, T’Rain employs a sophisticated geologist to reproduce algorithmically not only the topography of Google Earth but also the underlying strata of its actual geology. To acquire purchasing media for the game you have to “mine” simulated gold from the stratigraphic mazes of the algorithmic sub-terrain. In theory, this is as relatively costly, time-consuming, and difficult in the geologist’s virtual reality as mining real gold is from the earth.
To win the mining race in T’Rain, players around the world rev up their computers, overclocking their microprocessors, jacking up voltages, and chilling the circuitry with water or liquid nitrogen. To extract the gold and bring it intact to virtual market, they angle for underground mineral rights, purchase seismic surveying systems, dredging gear, hydraulic equipment, and transport facilities, and hire armed guards or even mobilize small armies. Millions of Chinese hackers take the lead, obsessively deploying petaflops—thousands of trillions of floating-point operations per second—to simulate the extraction process.
Like gold standards through most of human history—look it up—T’Rain’s virtual gold standard is an engine of wealth. T’Rain prospers mightily. Even though its money is metafictional, it is in fact more stable than currencies in the real world of floating exchange rates and fiat money. Down here, for example, the U.S. government deploys its own computer power to fabricate dollars by the trillions out of thin air to pay its bills. Goldman Sachs deploys rackfuls of computer power linked by fiber-optic lines at the speed of light to extract lucrative margins out of prestidigitory trading in nanoseconds with nary a reference to real values. In T’Rain it is much harder and thus more realistic.
Moreover—and this is the rub—the virtual money cannot be confined to T’Rain. It gets out. By various devious and ingenious techniques, T’Rain gold miners convert their stash by the millions for use in the real world. Centered in China, where exporting renminbi is heavily restricted, there are a number of possibly sinister but nonetheless effective “exchanges” and brokers and conversion facilities that translate virtual wealth into terrestrial wealth.
Not only does the company that owns T’Rain legally make dollars and renminbi galore and produce billions of dollars of capital gains for its shareholders, but “miners” manage to translate their virtual gold into millions of real dollars and yuan on earth. They can even use it to buy gold bullion. Reamde’s plot revolves around these phase transitions between the virtual and real worlds.
That’s Stephenson’s imagination at work. But think about it. This is not really a novel. We are living it, printed out in 3D. Right now.
Government monetary systems and financial institutions are floundering. As the economist John Mauldin writes, it’s “Code Red” for fiat paper.3 Gold and commodity markets gyrate portentously. Central Bankers meet solemnly to decide on levels of “quantitative easing”—on how many trillions of dollars of bonds to buy or sell, thus issuing new money into a flagging economy or sopping up money from a booming one. They hope against hope that these metafictional money fabrications can somehow overflow into the real world of economics and job creation. Lots of luck with that. Perhaps they should consult a novelist.
Meanwhile, somewhere over the rainbow, a possibly mythical man, the pseudonymous Satoshi Nakamoto, invents a new currency called bitcoin that is spurring a new financial system. This is not fiction, although Stephenson’s fingerprints are all over the story, which uncannily resembles the made-up world of Reamde. According to some of bitcoin’s protagonists, such as the legendary Hal Finney, the first user of the program, it emulates “Galt Gulch” in Ayn Rand’s Atlas Shrugged.4 Consider it a virtual domain where titans of finance can retreat to conduct their business out of the reach of governments. We have some ideas about who Satoshi may be, but no one knows for sure, any more than anyone could find or identify John Galt. But there are many intriguing speculations, and I have my own unoriginal ideas. He may be a team that began small and has now mounted into millions. For all I know, in some virtual world, he may be a Neal Stephenson hero.
More likely co-conspirators in the Satoshi doll’s crypto-layers are Adam Back, the British inventor of the analogous HashCash anti-spam email program, which provided an important function to bitcoin; or Finney, the Ayn Randian cypherpunk author of the most successful crypto-program in history, PGP 2.0, and the first miner of bitcoins; or Nick Szabo, the answer to three sophisticated textual searches that found Szabo’s prose statistically more akin to Nakomoto’s than that of any other suspected Satoshista.5
Szabo is a polymath crypto-scholar historian, an early expert on Internet pseudonymity, and the author of an influential paper—suspiciously unreferenced in the Satoshi white paper—proposing BitGold, a precursor of bitcoin. Some people think, in defiance of Szabo’s own protests, that he is actually Satoshi. But these cyberpunks and ponytails are just the teetering tip of the cyberberg.
; The man of the moment at the Bitcoin Summit in San Francisco in March 2014 is Marc Andreessen, perhaps the world’s bellwether venture capitalist, who became famous as the curmudgeonly young inventor of the first popular Internet browser, Mosaic. Launched in 1992 from the National Center for Supercomputing Applications at the University of Illinois, Mosaic in six months brought a million new customers onto the World Wide Web. When Andreessen was gently ousted from the Mosaic project and denied access to his software (“to give others a chance to share the glory”), he co-founded Netscape, the second popular Internet browser and a spearhead of the explosive expansion of the World Wide Web in the mid-1990s.
Back in the day, when I was writing in Forbes ASAP, I called Andreessen Silicon Valley’s best candidate to become “a new Bill Gates”:
Start by giving [Gates] 100 pounds of extra heft, half a foot of height and two further years of schooling. . . . [G]ive him a gargantuan appetite for pizza and Oreos, Bach, newsprint, algorithms, ideas, John Barth, Nabokov, images, Unix code, bandwidth. Give him a nearly unspellable Scandinavian name—Marc Andreessen.6
At the time, in the early 1990s, many people saw the Internet as throbbing with hype and seething with problems. “Silicon Snake Oil,” wrote Ira Stoll in a famous book by that name.7 To the young Andreessen, all the problems signaled that he was “at the center of the sphere,” gazing in wild surmise at “a giant hole in the middle of the world”—the supreme opportunity of the age—http, html, the Mosaic browser, Netscape, all the components of a consumer Internet.
Now, nearly twenty years later, he is on stage at the Bitcoin Summit being interviewed by a Forbes reporter as an expert on bitcoin. Declaring “bitcoin the biggest opportunity since the early Internet,” Andreessen announces that his venture firm—Andreessen Horowitz, which he launched with Ben Horowitz in 2009—has already invested $58 million in bitcoin companies and is committed to investing $100 million more. As Andreessen had explained in an article a month earlier in the New York Times,
A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers.
Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it.
On the other hand, technologists—nerds—are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.
Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start.
What technology am I talking about? Personal computers in 1975, the Internet in 1993, and—I believe—Bitcoin in 2014.8
But the Forbes reporter objects: Warren Buffett dismisses bitcoin as a “mirage.” Jamie Dimon, the CEO of JPMorgan Chase, calls it delusional. The Nobel laureate economist and Times columnist Paul Krugman declares it “evil.”
“I think,” says the ursine entrepreneur, with a sneer evocative of his early days as a Silicon Valley wiseacre at Netscape, “rich old white men crapping on technology that they don’t understand can be counted on to be wrong roughly 100 percent of the time.”
In 31,000 lines of code, Bitcoin exploits a set of complex cryptographic algorithms that supposedly make it “as good as gold.” Or maybe even better! Unlike gold, with the burden and glory of engagement in the real world, where it is rooted in the possibly changing time constants of extraction from deep beneath the earth, bitcoin is an entirely virtual, digital entity. Bitcoin, for better or for worse, is entirely an artifact of computers.
As a speculative investment, the virtual “coins” have engendered scores of real millionaires and even billionaires, with actual addresses, not merely URLs, in places like San Francisco, New York, Woodside, Greenwich, Palo Alto, Shanghai, London, Malta, Seattle, and Buenos Aires.
At the 2014 Bitcoin Summit, joining the fray of Satoshistas is Chamath Palihapitiya, a ferociously smart near-billionaire from Sri Lanka, a former force and friend of Mark (Zuckerberg) at Facebook. Virtually the only man at the summit wearing a suit and tie, Palihapitiya at the time owns some fifty million dollars’ worth of bitcoins. Tall, dark, and lean, the physical opposite of the Nordic bear Andreessen, the Sri Lankan warns against “hyperbolic bullshit” from others. But as for himself, “When I buy bitcoin, I am using capital to support a way of ripping apart the financial system.” Two years later, Palihapitiya was able to purchase a share of the Golden State Warriors NBA franchise.
Led by Andreessen Horowitz and Peter Thiel, venture capitalists early invested some $98 million in the bitcoin movement. The dramatic paper capital gains of the original creators of bitcoins gave the early owners a huge incentive to make the system work. In November 2013 the price of a single bitcoin first spiked above the price of an ounce of gold. Many holders of the coin cashed in, using the proceeds to start companies that supply needed infrastructure for the movement, such as bitcoin exchanges, digital wallets, bitcoin ATMs, and bitcoin-trusted computing schemes.
Bitcoin has already fostered thousands of new apps and firms and jobs. “Mining” equipment companies generated $500 million in revenues contriving ever-faster computer architectures and chip designs. The Chinese company Bitmain, the first to focus on ASIC technology for mining, became the world’s most profitable chip company in 2017, with reported likely profits of four billion dollars (compared with Nvidia’s three billion). Last time I looked (in late May 2018), the 16.5 million bitcoins extant—the system is capped at 21 million—had market capitalization of some $170 billion, and they were followed by the $75 billion market cap of Ethereum, which we will soon encounter if we don’t know it already.
But make no mistake. Bitcoin is really—that word again—a massively multiplayer online game. Mobilizing millions of players, hundreds of thousands of them online at a time, MMOGs such as World of Warcraft and Everquest are a formidable force, generating more than two billion dollars in subscription revenues. By comparison, the so-called bitcoin community is small. But bitcoin is a game with attitude and altitude, ingeniously designed to infiltrate and transform our world. So far the winner of the game is its founder-inventor, the mysterious Satoshi Nakamoto. He has amassed coins estimated to be worth ten billion dollars, better even than Neal Stephenson’s hero John Forthrast, the founder of T’Rain.
Like the creatures of Jurassic Park, bitcoin is the project of a possibly mad scientist that has escaped from the lab. Like T’Rain, bitcoin is now overflowing its “banks” and is about to flood the streets of your world.
Perhaps someone should be building an ark. Or perhaps bitcoin is our ark—a new monetary covenant containing the seeds of a new system of the world.
CHAPTER 12
Finding Satoshi
A Virtual Interview with the Bitcoin Founder1
Wandering the streets of Cypherville, standing on the corner of Bitcoin and Gold, peering in all directions, I hankered for a hero for my still hollow tale. Forlornly noting no heroines in view on this virtually all-male frontier, I circled the cenotaph of what they call the “bitcoin space.” I contemplated the tattoos and ponytails, the suits and ties, the electronic cigs and medicinal smokes, the credentials and the Cringelys of the worldwide “blockchain community.” They were mostly a peer-to-peer display. Marc Andreessen or Gavin Andresen, Naval Ravikant or Chamath Palihapitiya, Jed McCaleb or Nick Szabo could move a scene or animate a meeting or keynote a CoinSummit. But from venture capitalists to complementary coders to bit players or even legendary titans, none seemed to have the proof-of-work to hash into the Genesis Block of a heroic bitcoin chain.
Finally I gave up on this accessible circle and resolved to find and interview the Genesis man himself. Why not? Satoshi Nakamoto was the architect of bitcoin, inventor of the blockchain, and the prime mover of the plot. True, he did not mention the blockchain in his paper, though he specified it, and true, no one seeme
d to know who he was or where he had gone. No one could depict his fleshly contours or countenance. He was the John Galt of this saga, the source and symbol of the new Galt’s Gulch of bitcoin. I decided to mount my steed and ride up the arroyo to the ultimate crypts and redoubts, mines and mints of the bitcoin and blockchain ideas and their derivatives.
The first thing I discovered was that the guy is a writer, author of at least 150 pithy and aphoristic posts on the Cypherpunks list, the P2P Foundation website,2 the bitcoin forum, and other cryptographic bulletin boards. I collected his words and printed them out. He presented himself as a now forty-one-year-old Japanese programmer in the canonical C++ language, with—to judge by his spelling and idiom—a British education. He seemed to have a US time zone and German Internet address.
Never reportedly pinned in the flesh, he was an accessible avatar until December 11, 2010. Then—poof—he disappeared. On March 7, 2014, he suddenly returned, issuing on the P2P Foundation site a post of four words, which reduced the universe of possible Satoshis by one man. “I am not Dorian Nakamoto,” he declared, almost palpably cringing, dismissing from contention an elderly former CIA coder in Fortran named Dorian Satoshi Nakamoto, who lives at Temple City in Los Angeles. Then he withdrew even his Internet persona.
On the Internet boards, Satoshi’s followers were deliriously grateful. He lives. Don’t disturb him. Amid the clouds of incense, I knew I needed to tread delicately. But ever so gently, I planned my approach.
On May 30, 2014, three months after Satoshi’s last post, I left my wife and children in western Massachusetts and retreated to Europe. I would visit the Tuscan palazzo of the prolific economist-author and investor impresario from Dallas, John Mauldin, who was known to lure to his lair not only members of his million-reader blog following but also the likes of Niall Ferguson and Newt Gingrich.
Life After Google Page 13